Long Road To Success

[steven46]

Hello Everyone

It has been a long time since I posted anywhere.
I have spent the last several years learning “Price Action” by reviewing every available resource.
About a year ago I found what I believe are the final pieces of the puzzle (for me). One of the important lessons I learned is how to manage my emotional responses (I have been risk averse most of my life). I found a simple solution that I call
“descriptive narrative” to help me manage my
anxiety as my position moves around. Its a different world now and I am optimistic. Looking forward to success trading the S&P Futures (Emini)
Best to Everyone

 

[steven46]

Why did you choose S&P Futures (Emini) for trading, and how has your experience been so far?

Hello Mattk

Originally I chose Crude Oil, thinking that I might have an edge (having previous experience in this field). After much trial & error (failure) I discovered
the subject of “Price Action” and the work of Dr Al Brooks. I read everything I could obtain and learned that 1) this approach could provide the basis for profitable trading and 2) that in order to create a profitable system, 3) I had to go beyond Price Action and understand more about the markets in general. I studied several markets and decided to learn more about the S&P 500 Futures because it is a liquid market, with many institutional and commercial participants. Over the last several years I learned that most of the daily volume is automated and began to understand how those participants move the markets, and to recognize patterns of behavior. By chance I met a gentleman who traded for a large commercial fund and he was kind enough to share how he trades using just a few institutional tools. Since that time I have been successful in understanding the basic logic that applies to all liquid markets, and how to structure successful trades. Now I trade the S&P Futures because I am on the West Coast USA and it fits my daily schedule. I hope this helps.

 

[FranziskaSchulz]

That is great to see.
The way you know this is a time-consuming process and that you are not in a rush is appreciated and will result in good things for you for sure.

 

[Hoagland]

Where did you find this? Where can I read more about this practice?

 

[steven46]

Hello Hoagland

I am not sure I understand. I mentioned Dr. Al Brooks, that is one place where you can start. His website is about Price Action
I found it useful. As regards others, I have reviewed so many other websites over a period of years. What I suggest (if it makes
any difference) is that just looking for someone to tell you how to trade, doesn't seem to work. I have tried so many approaches.

The only approach that worked for me, was to go "beyond" what others teach. Currently I am working on a blog, and when I
have time, I will try to show folks how to frame markets in a different fashion. I am not posting to sell anything. I just want to
continue to learn and to maintain my consistency (now that I am finally making money).

I suggest starting with Dr. Brooks. I also found good value at a website run by a guy named "TraderDale". I hope this helps

 

[Benjaminbullish82]

Welcome back, out of the cave

 

[steven46]

What a strange comment

"welcome to you"
as well

 

[timsk]

I suggest starting with Dr. Brooks. I also found good value at a website run by a guy named "TraderDale". I hope this helps

Hi Steven,
Welcome to T2W!
I'm familiar with TraderDale's work - so I have an inkling where you're planning on going with this.
Fear not, I won't steel your thunder - just to say I look forward to seeing how the thread develops and reading what you have to say on the topic.
Tim.

 

[steven46]

OK timsk

As regards TraderDale, I like the gentleman's approach however he operates primarily
in the Currency markets, using longer time frames than I am comfortable with.

Another difference is that I use Volume Profile, not Market Profile. These are intrinsically
different tools., and so require different training.

Also, I use "Volume Weighted Average Price", a tool used by institutions as a way to
measure trade efficiency, and again I have modified it to suit my purposes (to trade intraday
primarily the S&P futures, although it would also work nicely with DAX and others).

Finally, I use the basic principles of Price Action Trading, although I have gone "Beyond Price Action"
(my blog title) in the sense that I use just a few basic setups, each of which differs somewhat from
the many (I think there are more than ten) that Dr. Brooks refers to in his texts.

So there you have it in a nutshell. Oversimplified of course but basically that is how I approach
trading in general. I will (at intervals) have more to say, if there is an interest and at some point
I will probably limit my posts here in order to concentrate on my blog.

 

[steven46]

I am short on time, however I wanted to post an example of the charts that I
use

On the left, a daily chart, and I show price framed using a Quarterly VWAP
On each side of the central VWAP, are the1st and 2nd Standard Deviation Bands

On the right side, I show a Globex chart and here the VWAP is single session
The bands on either side of the central VWAP are the 1st & 2nd Standard Deviation Bands

In addition I show a 20 period EMA and the horizontal red line is the POC, taken from
"Vollume Profile".

My basic setup is a 17 inch Dell Computer. The charts are Tradingview, however, for the
Emini and Crude Oil Markets, I execute using Ninjatrader. This allows me to have a backup
in place in case something interrupts my connection.

 

[steven46]

I am done for the day and wanted to provide another important element of my strategy

Trading the Globex instead of RTH, AND trading 15 minute candles (rather than 5 min)

The reason for this is that for the Emini market most of the automated volume occurs
during the the RTH session, and if you try to trade against the computers, you will
(eventually) discover that you are getting chopped up, and that the pullbacks are
so significant that it is difficult to 1) build a position, and 2) hold that position long
enough to overcome expenses. What I have been doing is to evaluate the market
in terms of the daily chart first, determining whether the market is in a "trading range"
or actively trending. Based on that evaluation, I then move to the 15 minute time
frame (with a 20 EMA in place) and position myself so that when the market breaks
above or below the 20 EMA, I can start to enter and build a position, holding until
just prior to the US open. This seems to be the difference, between getting chopped
up and losing, to consistently winning (Over the last year, I have been profitable
13-15 days per month).

To put it simply, NOW when I enter a trade, I know that it is statistically more likely
that I will have at least one (1) fifteen minute "follow through" candle moving in my direction

 

[timsk]

. . . To put it simply, NOW when I enter a trade, I know that it is statistically more likely
that I will have at least one (1) fifteen minute "follow through" candle moving in my direction

Interesting, Steven.
Just to clarify, are you entering and closing your trades pre-market, or opening them pre-market and then letting them run (if in your favour, obviously!) into RTHs? Also, aren't the pre-market spreads much wider? I ask as I spread bet the Dax and Naz 100 cash indices and they're definitely wider and variable pre-market!
Tim.

PS. Just read your post again and see that you're done by the open - so ignore my first question!

 

[steven46]

I don't trade the DAX, so you will have to evaluate that spread for yourself. What I noticed
about the Emini, is that during the hours from the London open, to just before the
US RTH open, institutions (sometimes) move the markets significantly, creating
"gaps opens" during the US RTH session. This is not new behavior, in fact some
years ago, I remember hearing Linda Raschke characterize it as "Stealing
the Trade". This behavior allows institutions to mark inventory, up or down,
then realize profits without much risk, during the next session. In the blog that I am
creating ("Beyond Price Action") I call this behavior "Cooperative Signaling".
There is nothing illegal about it, however I have learned to make use of it,
as an additional source of income

 

[steven46]

My sense is that I may stop posting at this point. Readers can refer to the prior chart example
showing the basic framing mechanisms (VWAP and Volume Profile). The "value added" is the
way that I use the combination to create a statistical skew.

Finally, I look for a pattern. That is to say I look for a behavior to occur (in this case a trend move)
and when the next opportunity occurs (at the London Open), I am willing to enter and hold,
and in this case the result is positive. Based on my review of data, it looks as though this method
has been correct (depending on context) about 73-76% this year. My weekly review of sessions
suggests that this is sufficient to keep it as a profit center within my "Playbook".

Developing and maintaining the process of finding repetitive behaviors requires significant effort
but then the rewards are potentially life changing.

 

[steven46]

This is a really good example of "repetitive behavior". In terms of trading. I start by identifying
the "initial" behavior, and then its a matter of stats. Recently, the 2nd occurrence has been
successful about 68% of time, and the 3rd, 4th and 5th less successful (60%, 55%, 50%
respectively). What seems to matter most is "context" and in this case, the Emini has just
retraced significantly. In this context the odds that price will retrace back up are increased.
It is common for price to move within a "channel". On this example chart, we see price
test the Standard Deviation Bands on each side of the VWAP Median. This is the "added
Value" that Framing provides.

That should do it for me. I hope someone benefits from this example